With house prices expected to slid and unemployment to rise substantially further, this third foreclosure wave will grow larger. If house prices fall another 10% over the coming year,as Moodys Economy.com currently forecasts, an estimated 18.6 million homeowners could be underwater.
More to Come
Even if the economy stabilizes in 2010 as expected, defaults will remain elevated long afterward. More large payment resets are due to hit so-called option ARMs. Most of these mortgages were designed on the 5-25 plan: five years of fixed payments and rates pegged to Libor after that. All the option ARMs issued at the peak of the housing bubble in 2005 and 2006 will thus reset for the first time in 2010 and 2011.
Case Shiller
Prices of single-family homes fell 0.5 percent from February, which is the sixth month-on-month drop, seems prices should have spiked from record low mortgage rates. Unless the crises in Europe remains huge, mortgage rates which are benefiting from a flight from the Euro, will rise sooner trather than later. This is a window of low cost money for buyers and refiers. Its a sale! And if this isnt causing a spike in prices then inventory and psychology and persistently the villains. Now that the tax incentives have ended, there seems to be no reason to expect prices to rise in 2010.
Moodys
Foreclosures are going to have a fairly negative impact on the housing market through the beginning of next year," she predicts, adding that housing prices could drop another 5 percent between now and the end of the year.
NAR
NAR says that total housing inventory soared 11.5 percent at the end of April from a month earlier. This means that it would take 8.4 months to sell all the properties, if sales continue at the current pace. High inventories are likely to prevent big price gains over the next year or two.
Long Term
the upside is in view.
The long-term recovery seems to be in place: National prices were up 2.3 percent from last year. Some cities are slowly working through their foreclosure mess, San Diego and San Francisco, up 1.5 percent each reduced their share of foreclosure inventory.
U.S. sales of new homes jumped nearly 15% in April to the highest level since May 2008 as homebuyers rushed to meet the deadline to qualify for tax credits. Sales jumped 14.8% in April to a seasonally adjusted annual rate of 504,000, the Commerce Department reported Wednesday. This follows an almost 30% gain in March. Everyone expects these numbers to crash next month, the tax incentives are gone. Mortgage Bankers Association already reports that reported that purchase applications plummeted. But it does point to a lot of buyer appetite out there.
Mark Zandi, Chief economist for moodyseconomy.com says that this is the time to buy, even though prices may continue to drop. Now, Zandi says, is best time to buy in a quarter-century, thanks to low mortgage rates, low prices and a recovery in place.
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May 22, 2010
Mortgage Bankers Weekly Update: Purchase Applications Plummet
Mortgage Bankers Association for the week of 5/19/2010
Market Composite Index: (loan application volume) decreased 1.5 percent on a seasonally adjusted basis from one week earlier.Refinance Index: increased 14.5 percent from the previous week and the seasonally adjusted Purchase Index decreased 27.1 percent from one week earlier. This is the lowest Purchase Index observed in the survey since May of 1997
Purchase Index: decreased 27.0 percent compared with the previous week and was 24.1 percent lower than the same week one year ago.
Refinance Share of Mortgage Activity: increased to 68.1 percent of total applications from 57.7 percent the previous week
Arm Share: remained constant at 6.3 percent of total applications from the previous week.
MBA outlook: (Excerpted from mbaa.org)
Purchase applications plummeted 27% last week and have declined almost 20% over the past month, despite relatively low interest rates. The data continue to suggest that the tax credit pulled sales into April at the expense of the remainder of the spring buying season. In fact, this drop occurred even as rates on 30 year fixed rate mortgages continued to fall, and at 4.83% are at their lowest level since November 2009, said Michael Fratantoni, MBA VP of Research and Economics. However, refinance borrowers did react to these lower rates, with refi applications up almost 15%, hitting their highest level in nine weeks
Projections We predict that mortgage originations will fall to $1.37 trillion in 2010 from an estimated $2.1 trillion in 2009, a 35% decline. Purchase originations will decline very slightly by around 3% to $717 billion, as home prices stabilize, and home sales increase. Refinance originations will fall by about 52% to $656 billion in 2010 as mortgage rates are expected to rise through the year. Refinance volumes in the first half of the year are likely to be somewhat higher than anticipated in prior forecasts as rates decreased sharply in recent weeks due to the crisis in Europe. We have adjusted our refinance forecast upwards in response.
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Freddie Mac Weekly Mortgage Update: Mortgage Rates Fall Again
30-year fixed-rate mortgage: Averaged 4.84 percent with an average 0.7 point for the week ending May 20, 2010, down from last week when it averaged 4.93 percent. Last year at this time, the 30-year FRM averaged 4.82 percent. Once again, the 30-year FRM has not been lower since the week ending December 10, 2009, when it averaged 4.81 percent.
The 15-year fixed-rate mortgage: Averaged 4.24 percent with an average 0.7 point, down from last week when it averaged 4.30 percent. A year ago at this time, the 15-year FRM averaged 4.50 percent. The 15-year FRM has not been lower since Freddie Mac started tracking the 15-year FRM in August of 1991.
Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.91 percent this week, with an average 0.6 point, down from last week when it averaged 3.95 percent. A year ago, the 5-year ARM averaged 4.79 percent. This breaks last week's record and, again, the 5-year ARM has not been lower since Freddie Mac started tracking the 5-year ARM in January of 2005.
One-year Treasury-indexed ARMs: Aaveraged 4.00 percent this week with an average 0.6 point, down from last week when it averaged 4.02 percent. At this time last year, the 1-year ARM averaged 4.82 percent. The 1-year ARM has not been lower since the week ending October 28, 2004 when it averaged 3.96 percent..
Freddie Sayz
Mortgage rates eased back once again this week to the lowest level of the year, said Frank Nothaft, Freddie Mac vice president and chief economist. Low mortgage rates, coupled with the homebuyer tax credit, helped strengthen the housing market in the first four months of the year. New construction on one family homes rose for the fourth consecutive month in April to an annualized rate of nearly 0.6 million units and represented the strongest pace since August 2008. Three of the four Census regions showed increases, led by a 14.8% jump in the South.
Moreover, homebuilder confidence rose for the second straight month in May to the highest level since August 2007, according the National Association of Home Builders/Wells Fargo Housing Market Index .
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Freddie Mac Weekly Mortgage Update: Lowest Level Of The Year
Mortgage Rates at Lowest Level of the Year
30-year fixed-rate mortgage: Averaged 4.93 percent with an average 0.7 point for the week ending May 13, 2010, down from last week when it averaged 5.00 percent. Last year at this time, the 30-year FRM averaged 4.86 percent. The 30-year FRM has not been lower since the week ending December 10, 2009, when it averaged 4.81 percent.
The 15-year fixed-rate mortgage: Averaged 4.30 percent with an average 0.6 point, down from last week when it averaged 4.36 percent. A year ago at this time, the 15-year FRM averaged 4.52 percent. The 15-year FRM has not been lower since the week ending December 3, 2009 when it averaged 4.27 percent.
Five-year indexed hybrid adjustable-rate mortgages ARMs: Averaged 3.95 percent this week, with an average 0.6 point, down from last week when it averaged 3.97 percent. A year ago, the 5-year ARM averaged 4.82 percent. The 5-year ARM has not been lower since Freddie Mac started tracking the 5-year ARM in January of 2005.
One-year Treasury-indexed ARMs: Averaged 4.02 percent this week with an average 0.6 point, down from last week when it averaged 4.07 percent. At this time last year, the 1-year ARM averaged 4.71 percent. The 1-year ARM has not been lower since the week ending November 4, 2004, when it averaged 4.00 percent.
Freddie Sayz
Interest rates on fixed rate mortgage declined for the 5th straight week, said Frank Nothaft, Freddie Mac vice president and chief economist. The National Association of Realtors reported that median house prices are recovering in more local areas in the latest quarter. On a year over year basis for the 152 areas the association reports on, 91 metropolitan areas had positive growth in the first quarter of this year. This compares to 67 areas showing positive annual growth in the fourth quarter of 2009 and only 30 cities in the third quarter of last year.
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Mortgage Bankers Weekly Update: Mortgage Applications Drop
Mortgage Bankers Association for the week of 5/12/2010
Market Composite Index: (loan application volume) increased 3.9 percent on a seasonally adjusted basis from one week earlierRefinance Index: increased 14.8 percent from the previous week and the seasonally adjusted Purchase Index decreased 9.5 percent from one week earlier.
Purchase Index: decreased 8.9 percent compared with the previous week and was 0.6 percent lower than the same week one year ago.
Refinance Share of Mortgage Activity: increased to 57.7 percent of total applications from 51.9 percent the previous week
Arm Share: remained unchanged at 6.3 percent of total applications from the previous week.
MBA outlook: (Excerpted from mbaa.org)
The recent plunge in rates on US Treasury securities, due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis, benefited US mortgage borrowers last week. Rates on 30 year mortgages dropped to their lowest level since mid-March. As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks, said Michael Fratantoni, MBAs Vice President of Research and Economics. In contrast, purchase applications fell almost 10 percent in the first week following the expiration of the homebuyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later
Projections
We predict that mortgage originations will fall to $1.37 trillion in 2010 from an estimated $2.1 trillion in 2009, a 35 percent decline. Purchase originations will decline very slightly by around 3 percent to $717 billion, as home prices stabilize, and home sales increase. Refinance originations will fall by about 52 percent to $656 billion in 2010 as mortgage rates are expected to rise through the year. Refinance volumes in the first half of the year are likely to be somewhat higher than anticipated in prior forecasts as rates decreased sharply in recent weeks due to the crisis in Europe. We have adjusted our refinance forecast upwards in response.
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May 4, 2010
Short Sellers And The Forclosed Catch A Break
To qualify in the relaxed, minimum two years period borrowers will need to come up with down payments of at least 20 percent. If 10 percent is all you got the wait to qualify after losing your home reverts to the four year minimum.
But Theres a Catch
Borrowers can demonstrate that their mortgage problems were directly related to circumstances having to do with the excesses of this great recession...such as job loss, medical expenses or a divorce. It might might be able to qualify for new loans with minimum down payments of 10 percent in just two years. We will need to see how this plays out after the new rules take effect July 1.
For those of us who lost houses to foreclosure because of financial mismanagement or speculation, the mandatory five year waiting period stands. To qualify for a new mortgage, Fannie expects borrowers to reestablish credit sufficiently enough to pass the companys automated underwriting system.
REsourced from www.yourpropertypath.com
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Rent Vs Buy Today
Mind The Gap
Marcus & Millichap just completed a study and found the gap between monthly rents and mortgage payments are at their lowest level in 20 years. Years of declining prices and mortgage rates have created a buyer's market. In 45 metro areas studied, Marcus & Millichap found the
difference between mortgage payment on a median-priced home and the rental option is down to $256. The smallest gap since 1993 as price to rent ratios come down to their historical mean, except in the priciest markets.
Rent Vs Buy Comparisons
The Real Deal
The rent vs. buy comparison is a lot like any financial planning, the outcome is a guess on the future direction of rents, equity growth and carrying costs. In other words, predicting multiple variables in an uncertain future. A rent or buy comparison can never secure the best financial move, but it can point the buyer to how future equity increases and cost cap assumptions work in tandem to cover the costs of owning: including the down payment, property taxes, insurance and maintenance.
The Rule Of Twenty
A simple way to look at the rent ratio is to take the purchase price and divide by the annual cost of renting a similar property. 20 is considered a useful rule of thumb. If you do the math, a ratio above 20 means you should at least consider renting. When the ratio is well below 20, the case for buying becomes a lot stronger. Of course, these are simplified tools to help you make a decision. you should never use the online buy Vs rent calculators to rest your decision on. Best to use them to understand what cost parameters and equity assumptions you need to make it work. Think of these financial variables as levers and toggle them to tease out an understanding of how your assumptions work
impact the purchase decision.
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